KENYA RE IPO TIPS AND TRICKS:

With the Kenya Re IPO slated for July 18, the market is already a buzz with preparations for its purchase. But what are the implications of such a listing?

As past IPO’s go, over subscription is as certain as death and taxes, more so with the size of this IPO. Here we try show you how to maximize your chances of getting more out of the IPO.

1. Multiple Accounts

In November 2004 the Central Depository & Settlement Corporation rolled out its services, in line with the modernization of the Stock Exchange. Investors are now required to open a CDS account (electronic share account) in order to trade at the NSE. These accounts are opened through Central Depository Agents (CDA) or their agents. Below is a list of CDA’s (does not include share agents)

Francis Drummond & Co. Limited

Ngenye Kariuki & Co. Ltd.

Dyer & Blair Investment Bank Ltd

Suntra Investment Bank Ltd

Francis Thuo & Partners Ltd(under statutory management)

Reliable Securities Ltd.

Nyaga Stockbrokers Ltd.

CFC Financial Services – Stock broking Division

Kestrel Capital (EA) Limited

Discount Securities Ltd.

Sterling Securities Ltd

African Alliance Kenya Securities.

Ashbhu Securities Ltd

Crossfield Securities Ltd

Apexafrica Investment Bank Ltd

Faida Securities Ltd.

Solid Investment Securities Ltd.

Standard Investment Bank Ltd

Bob Mathews Stockbrokers Ltd.

One of the ways to maximize your allocation in IPOs is to open multiple accounts with your CDA. To open a CDS account you need to provide the following documents:

1. 2 colured passport photos
2. 1 National ID/Passport photocopy.

And that’s all. The CDS account doesn’t attract any fees whatsoever and is free to open.

The trick is to open one account under your name and then open multiple joint accounts with friends and family. This ensures that if the allocation is as low as 200, if you have 10 accounts your allocation jumps up to 2000.

The downside of this method is that the refund process tends to become a headache, also consolidation when selling tends to be a bit messy. But if you don’t mind the hassle, then the end justifies the means

2.COMPANY ACCOUNT

The other trick is to start a company and open a CDS account for it. The documents required are:

1. 2 Colured passports for each director

2. Photocopies of National ID cards/Passports of directors

3. Certificate of incorporation (copy)

The beauty of investing through a company is that for one Institutional Investors have their own category when it comes to allocations, and the minimum investment amount is significantly higher than that of Individual Investors.

The other advantage of a company is the fact that it enables like minded individuals pool resources in a legally set out manner.

The obvious disadvantage of this method is the refund and sale processes which tend to become a burden.

Once again it entirely depends on your needs.

4. Go against the Market

As with all previous IPOs one thing is always certain – the market goes to a slump – this is because in essence the Exchange is held sway by the rule of demand and supply.

By this, the demand for the listed counters shifts to the IPO leading to price value loss in the market. Also during such hyped IPOs investors tend to raise cash by selling off the shares in their portfolio which also leads to price losses.

The advantage of going against the market is whilst the majority of people are waiting for their refunds, allocations and subsequent listing (which takes around a month), the market bounces back and you make a killing – usually two times over.

The other advantage of not tying up your cash for a month only to get a paltry allocation, is by the time it lists, you’ll have made money and the pundits will have sufficiently analyzed the counter and you can always get the share after it lists – with no minimum limit